The Retreat to Import Quotas

May 20, 1977

IT'S A FUNNY WAY to fight inflation. And it certainly doesn't help people who are poor. About the only thing that you can say for the Carter administration's current dive into protectionism, with its quotas on imported shoes and color-television sets, is that it probably will deflect Congress from doing still worse.

The spectacle verges on th indecent in the shoe case: A U.S. negotiator tours the Third World countries of the Pacific, accompanied by a delegation from the U.S. footwear-manufacturing industry, browbeating governments into restricting competition. Do you suppose that the negotiator was alsos accompanied by a delegation of retailers, who will lose business and jobs because of these quotas? Or a delegation of consumers, who will get hit with higher prices? The questions answer themselves. The effects here will be doubly harmful because it will be the people who buy cheap shoes, not expensive ones, who bear the brunt of them.

It's not simply that cheap foreign goods undercut expensive American production. In both cases, design has proved to be more important than price. The American manufactures have failed to adapt to rapidly changing markets. In shoes, a lot of the American factories missed the swing in styles. It was the foreign shoemakers who followed American tastes most acutely. Much the same turns out to be true in the electronics industry as well.

The number of imported color-television sets was down around 1.2 million in the recession year 1975 but leaped to 2.8 million last year. A lot of Americans assumed that Japan, Inc., was mounting another buge export offensive. In fact, it seems to have been the reverse. It was American retailers - notably the gaint, Sears, Roebuck - that went to Japan for types of sets that, they say, they cannot get in adequate volume and quality from American factories.

Most of the American manufacturers are mainly interested in selling big console sets, and they like to sell under their own brand names. They have their own marketing strategies. But Sears says that the market has swung to smaller, more portable sets, and Sears sells under its own private labels. Japanese electronics manufacturers have made a specialty of the smaller sets and have no hesitation about producing for the Sears labels. A couple of years ago Sears and perhaps other American retailers decided that they could stay with the trend in their sales only by importing from Japan, and that's why imports jumped last year.

With both shoes and color televisions, rising imports reflect a quarrel between American retailers and American manufacturers. In both cases, the retailers claim that the manufacturers are not moving with rapid changes in consumers' choices. The retailers have gone abroad to fill their stores - and the manufacturers have come to Washington for protection.

It's very hard for the government to refuse import protection as long as the unemployment rate is 7 per cent. The Carter administration is at least trying to hold down the damage by setting careful time limits on these quotas, so that they will not run on indefinitely as unemployment falls. The terms of these latest restrictions have not yet been formally announced, but it looks as though the import quotas will be held to three years for the television sets and four years for shoes. That's more than long enough.